Pulp and Paper Canada

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Surviving and thriving in a mature industry


July 1, 2007
By Pulp & Paper Canada

“You will continue to make an enormous contribution to Canada’s wealth. You will remain an economic powerhouse. Yours is an industry that must be supported and must be heard.” These stalwart statement…

“You will continue to make an enormous contribution to Canada’s wealth. You will remain an economic powerhouse. Yours is an industry that must be supported and must be heard.” These stalwart statements came from someone in a position to calculate their value and hammer them home for all they’re worth. Gary Lunn, Federal Minister of Natural Resources addressed delegates and their concern over what are often perceived as insurmountable challenges to Canada’s pulp, paper and forestry industry. Lunn adopted a highly pragmatic approach and highlighted his cabinet’s accomplishments on the pulp and paper portfolio. The achievements are numerous. “We are well aware of the challenges and we are well aware that there are many issues beyond our control. But we need to recognize some of these challenges as opportunities.” Lunn called for an allowing of the industry to restructure and rejuvenate, for support of the recent merger of research institutes Paprican, Forintek and FERIC, for taking advantage of the monumental opportunities in China. He called for innovation, especially along environmental lines, and highlighted his government’s financial support of investments in biomass, energy efficiency and research. “I am convinced that if we work together, we absolutely will succeed to turn these challenges into opportunities. I want to commit to you that I’ll continue to work with you and your research institutes and your individual mills. We want to hear from you.”

Power lunch

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The industry has a lot to say, and as Lunn’s luncheon address noted, much of it is now falling on attuned ears. The PacWest open forum featured a highly charged panel of delegates with exceedingly divergent backgrounds and experiences, who came together to communicate their impressions of where the industry was, where it is going, and how best to go about getting there.

“Everyone thinks China doesn’t take the environment seriously, but that just isn’t the case.” If anyone is in a position to confirm this, it’s Lorne Byzna, an independent consultant with years of experience working in various corners of Asia. “Environmental regulations are becoming highly stringent, they’re using Western consultants, and Indonesian and South American mills are some of the most efficient facilities in the world.” Although his words had a somewhat humbling effect, they were strong motivators, as a picture of a fiercely competitive and competent continent emerged. “Our vulnerabilities lie in our hardwood capacity, greater pressures for increasing costs to subsequently improve standards of living, social and environmental opposition to continued growth, and dependence on coal-burning for supplemental energy. How can we compete? Through promoting softwood fibre opportunities, we can continue reducing costs, with new, strategically located supermills, consolidation, and honing our employees’ skills. We can also focus on fast-growing hybrid aspens or other hardwood species.”

George Ionides, president of Temanex Consulting took a more local look at our industry, but conceded with many of Byzna’s points. “How do we get to thriving when, for the past five to six years, we’ve barely been surviving? The industry is mature, monolithic, slow to change, and our assets, though substantive, are not competitive.” With these factors in mind, Ionides impressed upon delegates a critical need for collaboration between mills and suppliers, and a heavy reliance upon Internet communication to achieve this. “We need to use our dominant nemesis – the Internet.” Ionides proposed a solution whereby mills would charge suppliers not on a dollar amount per kilogram of product delivered, but rather, in dollars per value contribution. “Suppliers would work with mills on technical issues to achieve this.” Ionides pointed out the challenges associated with the recent decimation of mill technical sections, and presented his argument as an opportunity to address this situation.

Ferio Pugliese, vice president of human resources at Catalyst Paper opened his talk, ‘Making change that is meaningful – from survival to revival’ by saying “we make products that people want, but we need to do some things differently.’ He provided some sobering statistics, confirming that 35 pulp and paper mills closed between 2004-2006, culminating in a loss of 12,000 jobs. “We need a cultural change,” he said. “We need engagement. It’s a matter of asking for traditional concessions versus grabbing the hearts and minds of people involved. It’s a softer approach. The current state has been motivated by pure economics, but the future state will focus on consolidation, restructuring, product rationalization, focused product marketing and new work rules. We need people to contribute.”

Todd Martin, partner with KPMG, took more of a hard-line, economic approach. “We have a creeping cost structure, an aged or aging asset base, technological obsolescence, market, product displacement, an inability to react to or counteract major structural change, changes in ownership structure, consolidation and rationalization.” In terms of what the industry can anticipate down the road, Martin was equally utilitarian. “In pulp and paper, there will be more financial buyers than strategic ones, and the sellers will largely be ‘distress sellers.’ We won’t see much action on the industry side, it will be on the financial side. Rationalization and consolidation will continue, and future capital planning must include an investment in human capital. The cyclical nature of the industry may keep select financial investors away.”

Alan Hitzroth, general mill manager of Zellstoff Celgar, emphasized the ‘surviving’ component of the conference’s theme, and veered away from ‘thriving.’ “It’s definitely a mature industry. To get through, we need to engage stakeholders. Our employees need to be engaged. Often, they aren’t aware of the financial matters of the business, and we need to educate them. At the mill level, to survive, we need to operate as efficiently as possible, every day. We need internal benchmarking to define what constitutes a ‘good day.’ Some mills will shut down, but in the interim, you need to do what you can to survive. A lot of it is up to us.”

Wrapping up the open forum was the indefatigable president and CEO of the Forest Products Association of Canada, Avrim Lazar. He adopted a global view of the industry and Canada’s position within in, positing that this highly globalized environment is a brand new playground ripe with challenges and opportunities. “We are at the doorstep of an entirely new world,” he said. “What this means is a ton of new markets and a ton of competition. This will require natural resources, and our role will be to supply a huge chunk of these natural resources. Yet, the general attitude is one of stupid defeatism. We didn’t get here by being lazy, or vulnerable or unable to adapt. But, like our competitors, we have challenges. Brazil has social problems; Russia is corrupt. We have huge advantages, but challenges as well, just as they do. Can we compete? Yes, if. And the fundamental if is in recognizing that we’re no longer working at home. When you leave home to work in a mill, you aren’t in Canada anymore and we need to stop living this fantasy. We need to get cost competitive and we can do it. The race, is on.”

If the level of enthusiasm for PacWest 2007 can be used as an indicator of our standing in this so-called race, we’re coming out ahead. As conference chairman Dave Willis noted, “the proportion of mill papers was high and the paper sessions were well-attended. Brett Robinson coached a lot of Canfor people to contribute with papers, often from non-traditional topic areas, and Canfor was well represented in the paper awards, which was well deserved. Increasing mill delegate attendance was a key goal this year, which we set at 60, and exceeded at 62. This exceeded the last six year average of 54 and in fact was the highest number since 2001. The change to consolidate the conference and really focus on the technical aspects got positive feedba
ck. I think we are on the right track.” The one-day workshop entitled Planning & Running Successful Mill Trials, where participants acquired skills to plan and run mill trials at any scale, presented by Martin MacLeod, was also extremely well received.

Technical Paper award winners

This year’s conference once again featured a robust technical component, with papers focusing on highly topical areas, such as the Mountain Pine Beetle, Paper Machine Technology — an Energy Focus and Energy, only to name a few. Awarded for their efforts and contribution were the following:

H.R. MacMillan Trophy for Best Paper & ARC George Sedgwick Memorial:

Martin Pudlas, Canfor Pulp Limited Partnership, Prince George

Constraint Analysis at the Northwood Pulpmill

First Runner Up awarded to:

Chuck Walls, Canfor Pulp Limited Partnership, Prince George

Pulpmill Leadership: A Culture Change at Canfor Pulp Limited Partnership’s Pulp and Paper Mills

Best Novice awarded to:

Rod Duncan, Canfor Pulp Limited Partnership, Prince George

Integrating the 9 phases of Turnaround Planning into an Overall Asset Manageent Program to Maximize Cost Savings

Best Supplier awarded to:

Bruce Allison, Leonardo Kammer, Pulp and Paper Research Institute of Canada, Vancouver, Robert Laurendeau, Canfor Corporation, Gerry Pageau, Howe Sound Pulp and Paper Limited

Optimal Averaging Level Control of Chlorine Dioxide Storage Tanks


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